The Council of Ministers has approved a Royal Decree Law (RDL) on Urgent Measures in Bankruptcy Matters whose objective is to facilitate the agreements that allow the survival of companies that enter a bankruptcy process. The rule completes the measures already implemented for the pre-bankruptcy phase and seeks to solve some deficiencies and problems detected in the bankruptcy phase. Specifically, a better gear is established between the bankruptcy agreement and the refinancing agreements and the legal obstacles for the sale of companies or production units without charges are eliminated.

The deficiencies in the Spanish bankruptcy process have caused that in 2013, 95% of the companies declared in bankruptcy ended up in liquidation. This percentage is much higher than in neighboring countries such as the United Kingdom (80%) or France (70%). The objective of the RDL approved today is to avoid the liquidation of companies when they are viable, a purpose that was also sought with the reform of the pre-bankruptcy phase (March 2014), giving coherence to the two procedures. In short, it is about facilitating the deleveraging process of companies and avoiding the destruction of the productive fabric, with the consequent loss of jobs. The rule is part of the 2014 National Reform Plan and includes the recommendations of international organizations.

One of the main novelties of this rule is to expand the possibilities of extending the effects of the agreement to dissident creditors and, in particular, to privileged creditors, depending on the majorities that vote in favor. Regarding privileged credits, without modifying their classification, four different classes are created, for the purposes of voting for the extension of the agreement, depending on whether they are labor, public, financial or other creditors. Within credits with special privilege, this is redefined as 9/10 of the fair value of the good or right on which the guarantee has been constituted, once the preferred debts have been deducted.

Privileged creditors, both general and special, maintain their ability to voluntarily adhere to the agreement, but the possibility is introduced that the effects of the agreement may be extended to dissident privileged creditors. The condition is that they vote in favor of the same creditors that represent 60% or 75% of the liabilities of each one of the aforementioned classes of loans (labor, public, financial and other), depending on the measures to be applied.

For ordinary creditors, the existing agreement approval regime is maintained, but the possibility is introduced of extending to dissidents, if they vote in favor of at least 65% of ordinary liabilities, the following measures: Waits between 5 and 10 years; you remove more than 50%; conversion of credits into debtor shares or participations, or participative credits up to 10 years; transformation of debt into any other financial instrument with different characteristics; and assignment of assets or rights in payment of credits, provided that they are not necessary for the continuation of the professional or business activity and that their fair value is equal to or less than the credit that is extinguished or, if it is higher, the difference.

In addition, creditors with real collateral, in the event of breach of the agreement, can separately execute their collateral and receive, if the asset pledged as collateral, the amount of the original debt.

Lastly, a mechanism is established to allow the measures of this RDL to be applied, once, to the agreements adopted under the previous legislation, provided that there are reinforced majorities (greater than those required for the approval of the agreement ) and so approved by a judge. Public and labor law creditors will be excluded from this provision.

If, despite everything, the company goes into liquidation, the rule establishes a series of improvements compared to current procedures. In order to facilitate the transfer of productive units of goods or services of the debtor, three measures are incorporated. Firstly, the transmission of contracts and licenses is allowed without the consent of third parties (counterparts and administration). The transmission of production units free of pre-existing payment obligations is also made possible, unless otherwise agreed or as provided by law (in the case of wages and social security obligations). Finally, the sale of productive units with goods given in guarantee is allowed, where the consent of the creditor is eliminated, if the acquirer takes the place of the debtor or if he receives the value of the guarantee; and, in another case, carryover majorities are foreseen.

On the other hand, the RDL creates a commission to monitor refinancing and reduction of over-indebtedness practices, with functions to monitor the measures adopted by this rule. The Commission will prepare an annual report on the effectiveness of the measures and on the evolution of private sector debt and its macroeconomic implications. Likewise, a telematic portal is established in the BOE with information on the companies in liquidation to facilitate their disposal.

Finally, the RDL addresses the legal modifications necessary to comply with the Judgment of the Court of Justice of the European Union of July 17, 2014, amending the Civil Procedure Law. Thus, the mortgage debtor may file an appeal against the order that dismisses his opposition to the execution, if this is based on the existence of an abusive contractual clause. This new provision will be applied to the foreclosure procedures in which the acquirer would not have taken possession of the property. Additionally, a period of one month is foreseen for the procedures in which the term to appeal the order that the opposition had dismissed would have ended.



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